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Gold rises near 1-year high

Author

bily

| Published on

September 4, 2017

Gold prices rallied on Monday, flirting with a one-year high after North Korea over the weekend tested a nuclear bomb and was said to be making preparations for the possible launch of another long-range ballistic missile.

Gold for December delivery GCZ7, +0.72% jumped $12, or 0.9%, to $1,342.40 an ounce, setting it on track for its higher settlement level since Sept. 26, 2016. The contract briefly touched $1,345.50 an ounce, around a level that it last settled at in early September 2016.

The strong gain came after North Korea on Sunday conducted a sixth and significantly larger hydrogen-bomb test than seen before, hailing it as a “perfect success.” That test followed Kim Jong Un, the isolated nation’s leader, showing off what he described as a hydrogen bomb capable of being mounted on an intercontinental ballistic missile.

The move is seen as stepping up pressure on U.S. President Donald Trump and further destabilizing the region. U.S. Defense Secretary James Mattis warned Pyongyang on Sunday that “we have many military options,” saying any attacks on the U.S., Japan or South Korea “will be met with a massive military response, a response both effective and overwhelming.”

South Korea said Monday the North is making preparations for launching another ICBM after two such test of long-distance missiles in July.

“The markets’ reaction seems similar to when missile launches have taken place in the past; investors sell stock” and “rush to safe havens,” said Hussein Sayed, chief market strategist at FXTM, in a note.

“An H-bomb is undeniably different from the previous missile launches or nuclear tests; it’s a game changer for North Korea’s deterrent strategy. However, the biggest question to investors remains — what’s next? Will the tensions lead to negotiations or war?” he added.

Sayed said China, North Korea’s closest ally, seems to be losing influence with Kim Jong Un, but that Beijing will try to avoid a war.

“A military attack on North Korea could mean an unmanageable flow of refugees to China, instability in the region, disruption of trade and of course, no country would desire a war in its backyard,” he said.

“That’s why markets aren’t yet pricing in the possibility of a war. However, caution should remain at this stage.”

In other haven trades on Monday, the yen USDJPY, -0.67% soared against the dollar, with the greenback buying ¥109.49, compared with ¥110.27 late Friday in New York. Stocks in Asia closed mostly lower, while European markets were mired in red across the board. U.S. stock markets are closed on Monday for the Labor Day holiday.

In other metals on Monday, silver for December SIZ7, +0.53% added 0.7% to $17.93 an ounce, while copper for the same month HGZ7, +0.88% climbed 0.9% to $3.14 a pound.

December palladium PAZ7, +0.78% jumped 1% to $986.95 an ounce, while October platinum PLV7, +0.41% put on 0.5% to $1,014.10 an ounce.

Gold prices rallied on Monday, flirting with a one-year high after North Korea over the weekend tested a nuclear bomb and was said to be making preparations for the possible launch of another long-range ballistic missile.

Gold for December delivery GCZ7, +0.72% jumped $12, or 0.9%, to $1,342.40 an ounce, setting it on track for its higher settlement level since Sept. 26, 2016. The contract briefly touched $1,345.50 an ounce, around a level that it last settled at in early September 2016.

The strong gain came after North Korea on Sunday conducted a sixth and significantly larger hydrogen-bomb test than seen before, hailing it as a “perfect success.” That test followed Kim Jong Un, the isolated nation’s leader, showing off what he described as a hydrogen bomb capable of being mounted on an intercontinental ballistic missile.

The move is seen as stepping up pressure on U.S. President Donald Trump and further destabilizing the region. U.S. Defense Secretary James Mattis warned Pyongyang on Sunday that “we have many military options,” saying any attacks on the U.S., Japan or South Korea “will be met with a massive military response, a response both effective and overwhelming.”

South Korea said Monday the North is making preparations for launching another ICBM after two such test of long-distance missiles in July.

“The markets’ reaction seems similar to when missile launches have taken place in the past; investors sell stock” and “rush to safe havens,” said Hussein Sayed, chief market strategist at FXTM, in a note.

“An H-bomb is undeniably different from the previous missile launches or nuclear tests; it’s a game changer for North Korea’s deterrent strategy. However, the biggest question to investors remains — what’s next? Will the tensions lead to negotiations or war?” he added.

Sayed said China, North Korea’s closest ally, seems to be losing influence with Kim Jong Un, but that Beijing will try to avoid a war.

“A military attack on North Korea could mean an unmanageable flow of refugees to China, instability in the region, disruption of trade and of course, no country would desire a war in its backyard,” he said.

“That’s why markets aren’t yet pricing in the possibility of a war. However, caution should remain at this stage.”

In other haven trades on Monday, the yen USDJPY, -0.67% soared against the dollar, with the greenback buying ¥109.49, compared with ¥110.27 late Friday in New York. Stocks in Asia closed mostly lower, while European markets were mired in red across the board. U.S. stock markets are closed on Monday for the Labor Day holiday.

In other metals on Monday, silver for December SIZ7, +0.53% added 0.7% to $17.93 an ounce, while copper for the same month HGZ7, +0.88% climbed 0.9% to $3.14 a pound.

December palladium PAZ7, +0.78% jumped 1% to $986.95 an ounce, while October platinum PLV7, +0.41% put on 0.5% to $1,014.10 an ounce.

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